Nokia does privateering deal with Pendrell, the NPE's third big acquisition in last year
25Mar13

Pendrell Corporation has announced that it has acquired “several fundamental patent portfolios covering a wide range of foundational memory technologies for electronic devices” from Nokia. In total, 125 patents and applications are involved in the deal, “81 of which have been declared by Nokia to be essential to applicable standards”.

The press release revealing the acquisition also states: “Pendrell has created a new wholly owned subsidiary, Helsinki Memory Technologies, Oy, (HMT), to continue the innovation efforts begun by Nokia and to enable broader use of these technologies via a global licensing program. Nokia will receive a license to all of the patents acquired by HMT as well as to new IP developed by HMT. Proceeds from patent licensing involving the newly acquired memory portfolios will be partially reinvested to fund the continuing development efforts.” What the press release does not reveal is how much Nokia received for the patents and whether it will have an on-going stake in any revenues they generate. However, whatever kind of deal was done, it is highly unlikely that Nokia will not be contemplating considerable financial reward for assigning to Pendrell what are described as “relatively unencumbered” and “foundational” patents.

What we seem to have here is yet another example of a patent privateering transaction. And it’s not the first one that Nokia has agreed. Over the last 18 months the Finnish company has also done deals with MOSAID (much to the annoyance of Google), Sisvel and Vringo. Back in April 2012, its finance director revealed that the company currently generates around €500 million a year from licensing and spoke of the “good opportunities” for further monetisation that its portfolio presents; while in July 2012 CEO Stephen Elop said that: "We may decide there could be elements of [the patent portfolio] that could be sold off, turned into more immediate cash for us—which is something that is important when you're going through a turnaround.”

One of the joys of privateering, of course, is that you get cash up-front, as well as an ongoing revenue stream – if things work out. If they don’t, you still get the upfront cash, but none of the costs involved in a failed licensing programme. That said, the types of NPE that Nokia has done deals with would be unlikely to be doing them if they did not see very strong potential for decent returns.

As for Pendrell, it is well worth keeping an eye on. The deal announced today with Nokia is the third big transaction it has done in the last year. On 2nd April 2012, the firm revealed (the press release is dated 2011, but that is incorrect) that it subsidiaries had “acquired more than 1,300 U.S. and foreign patents in five separate transactions” in areas relating to “wireless handset and infrastructure technologies, e-commerce, mobile applications, video delivery and security”, all of which had originated “at some of the leading technology firms in the U.S., Europe and Asia”.

Then in February this year it announced the acquisition of a “sixty-eight percent stake in Provitro Biosciences, a Washington State-based company that is a world leader in commercial-scale plant propagation methods”. The purchase, Pendrell stated, “will enable Provitro Sciences to develop the vast commercial potential for the breakthrough advances developed by Booshoot [Provitro’s previous incarnation], accelerating research and development, commercialization and licensing of plants and technology.”

Pendrell is listed on NASDAQ and has seen its share price move slowly upwards during the last 12 months. It is not the best known or most heavily followed of the publicly-quoted IP-based businesses, but slowly and surely it has been building what looks to be a portfolio with quite a diverse, and potentially lucrative, set of monetisation and commercialisation options. It looks to me like a firm that should be getting more attention than it currently does.